2016 Brings Three Opportunities To Rethink Resource Optimization

Digital. Disruptive. Deep in data. 2015 certainly kept many executives awake at night. In one short year, we witnessed the arrival of new businesses that own nothing and earn millions. Another crop of iconic brands disappeared, succumbing to the effects of mergers and acquisitions or the competitive muscle and creativity of digital darlings. And as the need for natural resources escalates, climate change and drought conditions continue to widen the gap between supply and demand.

What’s needed is a meaningful focus on resource optimization – and 2016 may be the year to do just that.

New trends that will change your resource optimization strategies

According to the recent report IDC FutureScape: Worldwide Digital Transformation 2016 Predictions, IDC foresees three trends that may change how businesses look at their resource optimization strategies:

22 billion Internet of Things (IoT) devices installed by 2018, driving the development of over 200,000 new IoT apps and services.

More than 50% of developer teams will embed cognitive services in their apps (vs. one percent today), saving U.S. enterprises over $60 billion annually by 2020.

Over 50% of enterprises will create and/or partner with industry cloud platforms to distribute their innovations and source others’.

When I read these predictions, three things came to mind: continuous intelligence, continuous innovation, and continuous optimization. By linking digital technology to analytics-driven decision making in every area of the business, companies have an opportunity to evolve and better understand and serve their customers.

Why wait and see whether IDC’s predictions hold true? Take a look at five areas that you can impact now with digital technology.

Asset management: Fixed assets can take up as much as one-third of all operating costs. As the use of IoT sensors and devices continues to grow, continuous monitoring will become the norm. As a result, companies can adjust the routing of its fleet and logistics process, drive down production downtime, and forecast production and operational demand more accurately. Once the data generated from these devices is shared across the entire business network, companies can help their external partners, suppliers, and other third-parties create a relationship that value continuous performance improvement and innovation.

Teamwork and collaboration: Through digital intelligence, machine automation, and robotics, workers can expand their ability to increase efficiency and make real-time decisions that can directly impact business outcomes.

Customer experience: There’s no debate that the proliferation of the digital channel is radically changing how companies engage with customers. Brands can directly impact the entire customer experience; from the first Google search to product and service delivery, businesses can transform passive customers into loyal advocates.

User adoption: The beauty of Big Data is that there is no longer an excuse for creating goods and services that customers do not want. The rise of social media and lowering inhibitions in providing personal information are empowering businesses to improve offerings and innovate in step with customer needs and wants. By using this digital intelligence, brands can proactively impact the mass-market appeal adoption of their products and services.

Environmental impact: Customers are more conscious about the environmental effects of the goods and services they use. More important, brand perception is directly tied to this criteria. In his blog “The Meaning – And Opportunity – Behind the Internet of Things,” Kai Goerlich states, “As decision makers receive information from direct and indirect environments, they can scan for precise navigation, logistics, weather prediction, agricultural planning, and pollution management, for example. By combining this streaming information with existing data, companies can create new insights and develop new products and services.”

As the next chapter of the digital economy unfolds this year, the business world finds itself at an inflection point. Some will rapidly scale their digital transformation to thrive in this new world. Others will operate “business as usual” and hope for the best. Which way will your business go?

Ignore The IoT Hype And Stay Focused On Key Principles

If you can ignore the PR white noise plaguing the Internet of Things (IoT) phenomenon and instead focus in on what the technology is and how to use it, you’ll have an easier time appreciating the fundamental principles that underpin it. Once you understand these first principles, determining exactly how IoT can help your business is a much more straightforward process. So, what are the first principles?

When planning your IoT solution, begin with the end in mind. Do not build off older systems, but consider it a greenfield opportunity. Be creative and construct an innovative IoT vision.

IoT is in part about having a more granular view of a situation, an operation, a process, or a piece of equipment, once it has been instrumented andinterconnected and had intelligence applied to it.

Standards are still evolving, so protocols for IoT remain in flux. It is important to consider the protocols you adopt.

IoT is natively an IPv6 technology, so if you have not started using IPv6, now is the time to begin.

Open architecture and standards-based networks should be part of your approach.

Networks should be vendor-agnostic.

All IoT wireless technologies, regardless of vendor, are classified as constrained networks, meaning they cannot handle much in the way of data rates. Ten to 30 kbps should be considered average.

Intelligence needs to be pushed outward towards the edge of the network. Not all data needs to go to the center or to the cloud. A good percentage of data will live only on the network fabric.

Security and federated protection points – firewalls, intrusion detection and protection systems, AAA systems – all need to use a hybrid blend of centralized and distributed architectures operating in concert.

Privacy is required by law, so it must be respected.

As IoT evolves, more principles will join this list. The scenario is highly dynamic and demands an agile approach. The ability to see into your systems at a highly granular level will be extremely beneficial for lowering costs, improving quality, and speeding up processes. The key adage to consider pertaining to IoT is “situational awareness drives better and faster decision-making.” It’s this ultra-granularity that produces the greatest value for your enterprise.

Join me on December 6 for an interactive webcast, in which I’ll explain each one of these foundational first principles with industry examples from healthcare, manufacturing, smart cities, and more.

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About Michael J. Martin

Michael J. Martin, MA, MBA, MEd, GDM, SCPM, PMP, is Senior Executive and Internet of Things Lead at IBM Canada. Throughout his career, Michael has touched on every sort of broadband network. In his many years serving the broadcast industry, he worked with microwave, satellite, over-the-air VHF/UHF, and optical-fiber solutions. For the past decade, he has been involved with narrow-band networks and, most specifically, with the Internet of Things and networks that leverage mesh, star, and cluster tree topologies.

Facing The Arctic Challenge At The World's Most Northerly Wind Farm

Situated on a remote island at the far tip of Norway, Havøygavlen is the world’s most northerly wind farm.

Deep in the Arctic Circle, the weather here is both unpredictable and extreme. Temperatures can drop to -25°C and winds can howl at over 180km/h.

So why build a wind farm in such a hostile location? The Arctic offers massive potential to generate clean, renewable energy due to the high average wind speed (around 30km/h) and the fact that colder air is denser, meaning it carries more kinetic energy.

Designing a wind farm to handle these conditions is challenging. The wind and cold make the turbines wear faster than in other locations.

When the wind is from the south, it comes in a smooth stream, perfect for large-scale wind turbines. But when it’s from the north, it rises up the cliff face from all directions in a very turbulent stream that can present negative wind shear and other problematic wind phenomena. This turbulent wind places extraordinary loads on the pitch and yaw mechanisms that are used to adjust the blades and keep the turbines facing into the wind to capture the most energy.

For the bearings it is necessary to use a lubricant that won’t freeze, and one whose properties remain largely constant over a wide range of temperatures. The cold can also cause icing on the rotor blades, potentially unbalancing rotors and reducing power output of the turbines.

Maintenance is therefore a primary concern for Havøygavlen’s owners, Arctic Wind. Unprepared for such harsh conditions, the wind farm’s early years were hardly a success. The turbines twice had rotor blades sheared clean off, and once a turbine even collapsed to the ground in a storm.

It’s not just the extreme weather that makes life difficult for the Arctic Wind team. Transporting spare parts and maintenance crews to such a remote location is a logistical nightmare, and during the Arctic winter the area is plunged into 24-hour darkness.

The identification and prediction of failure are a key part of wind farm operations. When Fedem Technology approached them with a proposal to try a new technology, the operators at Havøygavlen jumped at the chance.

Fedem (which stands for Finite Element Dynamics in Elastic Mechanisms) is a Norwegian company specialising in advanced engineering analysis. It has developed cutting-edge software for modelling structures and mechanical systems under the influence of complex loads.

The software uses a nonlinear structural dynamics approach to simulate the system’s dynamic behaviour and enable new ways to accurately monitor and calculate the remaining life of the asset. The software detects both instantaneous consequences of one-off events and the long-term effects of cyclic loads.

The principle is to create an advanced digital model of physical objects, and update it with remote sensor feeds.

Analysis is run based on the laws of physics. “We create a digital clone of the installation, collect sensor data from the physical structure in the cloud, analyse the data we get in real time, and always have an overview of the structure’s condition,” explained Arnulf Hagen, CEO, Fedem Technology.

Fedem was recently acquired by SAP. With this acquisition, SAP plans to build an end-to-end #IoT solution in which a digital avatar continuously represents the state of operating assets through feeds from sensors, replacing the need for physical inspection with a “digital inspection.”

“When you observe the same things remotely through the Internet as you would when you observe the object physically, that’s when you start getting real value for money,” says Hagen.

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About Gavin Mooney

Gavin Mooney is a utilities industry solution specialist for SAP. From a background in Engineering and IT, Gavin has been working in the utilities industry with SAP products for nearly 15 years.
He has had the privilege of working with a number of Electricity, Gas and Water Utilities across the globe to implement SAP’s Industry Solution for Utilities. He now works with utilities to help them identify the best way to run simple and run better with SAP's latest products.
Gavin loves to network and build lasting business relationships and is passionate about cleantech and the fundamental transformation currently shaking up the utilities industry.

Everything You Know About Leadership Is Wrong

Companies that begin life digitally operate differently from the incumbents they threaten and unseat. Employees at digital companies don’t waste time gathering and analyzing information; they use live data to make decisions. They don’t need to wade through organizational hierarchies to get permission to act; their leaders explain business goals and then empower them to use their best judgment.

To compete, incumbent companies have to transform not only decision-making processes and hierarchies that have hardened over decades but also the nature of leadership itself. The leadership strategies and behaviors that drove success in the knowledge economy aren’t sufficient to navigate a successful transition to the digital economy.

Two-thirds of Global 2000 CEOs will center their business strategies on digital transformation by the end of 2017, according to IDC. But few business executives today have the leadership mindset or skills necessary for these strategies to succeed, according to the Leaders 2020 study conducted recently by SAP, Oxford Economics, and McChrystal Group. The study found that only 16% of executives are ready to lead their companies through this transformation.

Leaders must lead differently if their companies are to transition to the digital economy and reap its rewards. In 10 years, for example, 75% of the companies that were listed on the S&P 500 Index in 2012 will have been replaced, according to a study by Innosight. Meanwhile, global competition is heating up. Rising disposable income in emerging economies has sparked the advent of new rivals—and in a survey by consulting firm Accenture, 70% of marketers in those economies expressed confidence in their ability to execute a digital business transformation. In mature economies, the figure was just 38%.

But it’s not too late to learn the essentials of digital leadership.

Communicate the Digital Mission

Fostering an organization whose employees have the skills, tools, authority, and information they need to make decisions in the moment begins with leaders who can formulate and communicate the digital mission. Randall Stephenson, chairman and CEO of AT&T, understands the forces driving digital transformation. Under his guidance, AT&T’s lines of business have expanded—both organically and through acquisitions—to include extensive digital operations, like DirecTV and potentially, as of press time, Time Warner, according to The New York Times. So even as AT&T continues to compete for market share against established and startup telecommunications providers, the company is going head-to-head against digitally based companies like Amazon and Google.

Every business must become digital and work in the cloud, but the change doesn’t merely mean making acquisitions, buying new technology, and rewriting org charts. A new digital workforce is needed as well to meet the transformation challenge. And like the companies they serve, the members of this new workforce will have to develop new abilities and prepare to take on new roles.

That reality is the impetus for Stephenson’s ambitious initiative to transform his company by transforming his team. Through a program launched nearly three years ago, AT&T is underwriting education and professional development opportunities for employees who are willing to pursue the studies on their own time. Those who take advantage of the offer can learn new computing skills that align with the company’s blueprint for digital transformation.

AT&T’s education plan shows the extent to which data is driving a profound change in employees’ daily tasks, functions, and core value to the company. Until recently, businesses sought knowledge workers who were capable of reviewing, assessing, analyzing, and disseminating data in support of decision making. But in the digital economy, companies must be able to respond in the moment to customer, market, and competitive changes. Reviewing masses of data and following traditional hierarchical decision-making processes defeats that goal. To succeed and, in truth, to survive, companies must have that data available when they need it and make a decision in the right moment.

Invest in Understanding How Work Gets Done

With that in mind, digital leaders must invest in understanding how work gets done and then commit to adjusting processes, deploying the right technology to support those processes, and measuring what adds value for customers and, therefore, to the bottom line. Yet only half of the executives surveyed by Oxford Economics rated their companies’ senior leaders as highly proficient in using the technology necessary for transformation.

Digital Leadership in Hard Numbers

Executives who have already established themselves as digital leaders demonstrate the value of their initiatives in hard numbers, according to the Oxford Economics study Leaders 2020. For example, their companies are much more likely to sustain top financial performance in terms of both revenue and profitability. Where leadership has embraced digital, companies:

Are 38% more likely to report strong revenue and profit growth

Have more mature strategies and programs for hiring skilled talent

Report one and a half times more effective collaboration, which contributes to productivity

What’s more, becoming digitally savvy isn’t enough. Leaders’ aptitude for cultivating teams and work environments that can make good use of technology is also essential. Indeed, nearly 80% of the companies considered farthest along in digital maturity make data-driven decisions, according to the Oxford Economics study (see Digital Leadership in Hard Numbers). Meanwhile, 53% of respondents were found to be clinging to old-school decision-making styles and failing to map decisions to strategy. As a result, only 46% qualified as equipped to make decisions in real time.

Lead by Simplifying

Digital leaders make it a priority to continually simplify processes and decision-making procedures to reduce institutionalized complexity and bureaucracy. These impediments take a real toll. A study by the Economist Intelligence Unit found that organizational complexity costs businesses up to 10% of profits. Flattening organizational hierarchies and encouraging transparency and organization-wide inclusivity in the decision-making process can help erase such losses, according to the Oxford Economics study.

Achieving these goals doesn’t require a committee. Empowering people at lower levels to make business-critical decisions based on available data has a natural flattening effect on the hierarchy. And as individuals and the enterprise as a whole become accustomed to having access to real-time data that speeds responsiveness, decision making becomes distributed across the organization.

That doesn’t automatically mean that the organizational pyramid is dead. Rather, it empowers employees, the organization, and leadership by placing responsibility for individual responses and actions in the hands of the people best equipped to carry them out, take ownership of the results, and ensure their success. This key characteristic distinguishes digital workers from knowledge workers: they have access to the data necessary to drive the right decisions at the right time, regardless of where they appear on the organizational chart. This not only empowers people at lower levels but also eases the bureaucratic burden on upper management, which is then freer to focus its time and energy on leading the organization forward instead of directing its day-to-day and even minute-by-minute activities.

Lead by Getting Ahead of the Customer

Creating an organization that’s capable of capturing data and making decisions in the moment can transform customer relationships. Besides responding to immediate customer needs, digitally transformed organizations can also predict emerging requirements, even before the customer is fully conscious of them.

To achieve this, digital leaders must be able to view digital in terms of its ability to support innovation: to make it possible for the business to deliver an array of services and advantages that it wasn’t possible to deliver before.

“The challenge is to not ask the question, ‘How does this affect my business?’ That’s inherently a defensive, firm-centric question,” says David Rogers, author of The Digital Transformation Playbook and a member of the faculty at Columbia Business School. “Instead, firms need to look at every new technology and digital capability and ask, ‘How might this allow us to offer new forms of value to our customers that we could not have done in the past?’ And be continuously looking.”

Being plugged into digital’s power to transform customer relationships thus allows an executive to evolve into a digital leader with the vision and the tools necessary to conceive and implement continuous innovation.

Concentrate on Team Dynamics and Employee Engagement

Millennial leadership is well suited to understand the human side of digital transformation. Digital leaders of older generations must recognize the importance of inviting and acting on input from Millennials, which is essential to inspiring them to perform at their best—and to achieving the overall goals of digital transformation.

Digital leaders must also understand that encouraging diversity in their workforce isn’t simply a matter of fairness; it’s also a source of competitive advantage. Leaders who build diverse organizations have more engaged, productive employees, as well as higher levels of innovation, according to the Oxford Economics study. This in turn leads to better bottom-line results. Companies that reported higher revenue and profitability growth were more likely to cite the positive impact of diversity on their numbers.

Despite this, the study found that only 60% of companies have adequate programs to ensure that they are developing a digital workforce. The shortfall is hurting companies’ ability to hire and retain talent: only 53% say they are successful in attracting qualified applicants.

This problem will only get worse as Baby Boomers exit the workforce. Digital leaders will be increasingly pressured to maintain stability and continuity in their workforces. The challenge will be especially difficult for companies that lag in meeting the expectations of professionals who have entered the workforce in the era of the gig economy. They expect to make numerous career moves and don’t necessarily see length of tenure as a priority.

Thus, companies need processes for bringing new staff members up to speed as quickly as possible while optimizing their productivity, encouraging them to make constructive contributions to the business, and motivating them to deliver their best performance. They must also develop programs for continuous learning and job rotations to engage and retain workers who may not otherwise remain with the company as long as they would have in past generations.

Address the Generation Gap

Millennials and Generation Z have different expectations of what it means to be an employee and how to use technology than other generations do. They expect collaboration across the hierarchy, which is important to keeping them engaged with the organization and with their personal passions. Fostering a sense of meaning within the workplace, then, is another element of digital leadership; leaders must make the company a place where employees feel as engaged and rewarded as they can be and can do their best work.

In this respect and many others, most businesses are contending with a generation gap. The Oxford Economics study found that in comparison to older executives, Millennial executives have a much more pessimistic view of their organization’s ability to perform well in such key areas as using technology to achieve competitive advantage, collaborating internally, inspiring employees, and fostering an organizational culture that promotes feedback and reduces bureaucracy. In addition, the Millennials are more conscious of—and place a premium on—diversity and its benefits. Addressing that generational disconnect is key to digital leadership.

When today’s mid- and late-career executives entered the workforce, it was understood that younger workers invested the early years of their professional lives paying their dues. But that model no longer works in a market in which a company’s future depends on an approach to digital transformation that comes most naturally to younger executives. And those executives will not invest themselves and their expertise in companies that fail to recognize and respect Millennial workplace priorities.

Help Employees Address Future Challenges

Digital transformation isn’t just altering employees’ expectations of their careers. It’s also remaking jobs and what work itself entails. In response to a survey by consulting firm Cap Gemini, 77% of companies reported that they saw digital skill gaps as the chief obstacle to their digital transformation.

Their concerns are well founded. Oxford University examined 702 job descriptions across all job types and found that 47% were likely to be replaced by technology within a decade. Another 19% were moderately likely to be replaced. With that in mind, part of the leadership challenge in digital transformation is anticipating how people will work in this world and how artificial intelligence, robots, and people will be integrated into a new and more efficient workforce. How will people interact with these digital forces in the workplace? What will it mean in human terms?

Digital leaders can’t expect employees to keep up with these changes on their own: things are simply moving too quickly. AT&T’s Stephenson recognizes this. The New York Times reported that the company’s digital transformation is projected to make 30% of current jobs obsolete by 2020. That’s why, to get ahead of that challenge, Stephenson ordered the creation of AT&T’s training program, which includes an extensive curriculum of online and classroom courses.

This approach illustrates a key characteristic of digital leaders: the ability to think conscientiously about where their companies are headed, what skills their people will need, and how they can help them develop the skills they’ll need as their roles evolve. Digital leaders are also able to articulately communicate to employees where the world is headed so that they are motivated to get there and be productive now and in the future.

Unleash a New Generation of Executives

Companies can no longer afford to delay recognizing the digital sea change that is transforming decision making and the capacity to respond in real time to challenges and opportunities. Led by Millennial executives, the new digital workforce is ready to spark unprecedented performance improvements in organizations that do not constrain their ability to communicate, collaborate, and contribute. Digital leaders are devising strategies for harnessing their energy, enthusiasm, and innate understanding of digital capacities to achieve higher levels of productivity and profitability. The remaining leaders face a choice: embrace this change or get left behind. D!

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About Michael Rander

Michael Rander is the Global Research Director for Future Of Work at SAP. He is an experienced project manager, strategic and competitive market researcher, operations manager as well as an avid photographer, athlete, traveler and entrepreneur. Share your thoughts with Michael on Twitter @michaelrander.

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What Does Blockchain Mean To The CFO?

In my previous blogs, I’ve stated that CFOs need to play a strong, active role as an independent challenger for the business while assessing risks – balancing risk and opportunity for the business. I’ve also covered changes to our role as digitization begins to envelop our organizations. The digital economy will impact many things, that we can be sure of.

In the digital economy, collaboration is increasingly important, and the task of the CFO is to establish this collaboration role, and someone needs to establish collaborative digital finance processes and safeguard their effectiveness and efficiency. In many cases, CFOs have taken that role. Looking to next year, there’s a huge expectation that the technology known as “blockchain” will gain greater prominence in practical business applications, and I believe CFOs can and should enter the picture of this discussion early on. It’s not the realm of the technologists alone, and many are pointing towards blockchain as an underpinning of a digital economy.

The blockchain movement and its accompanying technological capabilities are incredibly intriguing, and a quick Google search delivers about 416,000 results, underscoring the interest. If we can build use cases and applications, blockchain can radically change the way we do business. As a CFO, I need to be mindful of risks, and some associated with this technology are difficult to comprehend upon first reflection. However, as I wrote previously, this is typical of the CFO in the digital economy. Both on the business and compliance sides, we are able to leverage traditional skill sets and our knowledge while stepping into unknown territory in both areas at the same time.

Singapore has announced the city state’s central bank will explore blockchain by launching a pilot project with the country’s stock exchange and eight local and foreign banks to use the technology for interbank payments. While blockchain technology, which emerged from bitcoin, is expected to draw interest by banks and other centralized institutions, it’s expected that companies like Amazon, Facebook, and Google will be early adopters as well.

Being mindful of risks

Given that a lot of information is shared in a blockchain, I wonder what it would do to the system – beginning with fraud and going onward along the risk chain – if and how someone could break into it. I’m sure there’s a good answer – maybe hackers could hardly or never access all of information, given its distributed ledgers. But my point here is that the role as a CFO is to assess the risk and benefit. The latter would include an analysis of the energy footprint of blockchain technology. Is the hardware used sufficiently and is it energy efficient? Are the algorithms computationally efficient in this regard?

Blockchain promises a huge benefit because it increases how we do business and the speed at which it can be conducted. It promises to eliminate the intermediaries and bring new life back to some professions. Some of the technology’s early adopters are public audit firms, and their perspective is in the public interest. I saw a presentation from a utilities company, and it was mind boggling what they’re exploring with blockchain. They can see a case extending collaboration and interaction all the way to the customer in a way they’ve been previously unable to achieve.

From the finance perspective, there’s a limit to optimizing processes and the number of people involved. Even with full robotics, oversight is needed, i.e., someone who watches the robot. When we reach those limits, we turn to technology to help increase volumes and transaction processes. I see a lot of potential for blockchain in this regard, with new, associated business models that have potential.

A hot topic in financial services

At I recent forum for financial services, I co-hosted a dinner where blockchain was the topic. It was amazing to see how people had picked up on the topic, and there were a lot of questions. Many had similar questions about exploring the risks and benefits, and I think it’s fair that everyone took away the sense that they need to keep their eyes on and learn more about it.

Consistently, I see a lot of people taking note, especially those close to the financial market or treasury. Predictably, IT departments are keenly curious, but I think CFOs need to step up their game and begin looking more closely, forming points of view to guide their businesses. It ties in with traditional CFO skills like business modeling, risk and compliance, and advising the business. This remains at the core of our role.

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About Matthias Heiden

Dr. Matthias Heiden, senior vice president, regional CFO, Middle and Eastern Europe (MEE), is responsible for the field finance organization of MEE. In this role, he supports the organization in managing P&L, continuously driving strategic finance transformation initiatives initiated by Corporate Finance together with the other regional CFOs. This team helps improve business-related processes and supports the Market Unit CFOs in their role as business facilitator and transformation agent.